Washington, D.C., like the rest of the country, is entering a transitional period in 2021, and many hope that will extend to the housing market. Demand could start to outpace supply in the area, driving up prices and creating a highly competitive marketplace.
That means those looking to buy or sell a home should learn a bit about the local housing market to assist with the process — especially if they believe this area could be part of their new life. Staying informed is the key to any real estate decisions you make. Keep reading for more information on D.C. housing market trends in 2021.
D.C. Housing Market Predictions
A significant economic recovery is likely on the way, thanks to the reopening of businesses that were forced to close their doors in 2020 and consumers looking to head out and enjoy themselves this summer. Current homeowners might want to see how the economy reacts before committing to selling, however, so finding that perfect property could prove challenging.
Rental Income Profitability
The lack of supply in the real estate market could make it more difficult to find a rental property. Those who track one down won’t have much trouble finding renters, though, because the rental market is incredibly competitive. The average rental price for a one-bedroom apartment in Washington, D.C., is $2,175, which is down 3% from 2020. The average two-bedroom apartment goes for $2,950, up 2% from last year. What you can expect to receive in rent varies by neighborhood, as a one bedroom in Georgetown averages over $2,700, while the same property in Congress Heights might only get you $1,100.
The median sale price of $635,000 means D.C. real estate isn’t cheap. You can find a deal by searching in some less desirable neighborhoods, though. Dupont Circle, for example, is centrally located near downtown and has an average listing price of $459,000; just keep in mind that much of the real estate in that neighborhood is multiunit. Georgetown has an average listing price of $1,612,000, while Chevy Chase’s average is $1,200,000, and Old Town is $889,000. Sitting in the middle are neighborhoods like Columbia Heights, at $632,500, and Northwest Washington, with an average cost of $647,450.
The U.S. current-dollar GDP decreased by 2.3% over the last year, a number that equals losses of over $500 billion. There is a reason for optimism, though, because global vaccination efforts could help economies recover worldwide.
D.C.’s unemployment rate remains relatively high at 6.9%. That’s 3.6% higher than before the pandemic but also 2% lower than May 2020. The Washington area was fortunate in many ways, because it has many government employees who continued working when other industries were on lockdown.
2021 Economic Outlook
The global economy could grow by 5.5% in 2021, following a 3.5% contraction in 2020. D.C. is well-positioned to take advantage of this economic growth, because it’s the country’s third-best city for young professionals and the fifth-best large city in which to live, according to researchers at Resonance Consultancy.
Supply and Demand
Supply in the D.C. housing market is low, with fewer homeowners selling than is necessary to keep up with demand. The number of homes sold in March 2021 is up by nearly 20% over 2019, though, showing that inventory is still moving. The low supply in D.C. will drive a sellers’ market, although we could see construction rates increase as lumber prices return to normal, creating additional supply in coming years.
The Millennial Factor
Millennials are the country’s largest living generation after passing Baby Boomers in 2019, so it makes sense that they would significantly influence the housing market. People in this generation are looking to buy in the suburbs and are making large down payments, helping drive the sellers’ market in D.C.
The elephant in the room throughout all of this is COVID-19. A full economic recovery is mainly dependent on a few factors, including vaccine acceptance and rollout, variants of concern, and global COVID recovery. It’s too early to say if 2021 will bring a full recovery because there are so many variables in play. A COVID variant making vaccines obsolete or D.C. residents not returning for their second shots could help the virus take off again. All that uncertainty led to an economy and housing market that experienced a rough year in 2020.
There’s an excellent chance that mortgage rates will increase at some point in 2021 because they remain incredibly low. Rates have been around 3.85% in D.C. for the last few years, but they’re currently in the 3.1% range for 30-year fixed and about 2.3% for 15-year fixed.
It’s unlikely that we’ll see a buyers’ market in D.C. in 2021 because there isn’t enough supply to go around. Your ability to buy in D.C.’s current market will depend on your budget. The city is expensive, particularly in the most desirable neighborhoods, and the demand for affordable housing creates a competitive market for these properties.
The average sale price in Washington, D.C., comes in at $544 per square foot. This number is an increase of 10% from the previous year. It’s also worth mentioning that the average list-to-sale price is 101.3%, so the typical home sells for 1.3% above the list price. Roughly 42.5% of homes sell for above the asking price. Buyers and sellers should also know that 9.5% of homes drop in price before selling, a number that is 7.9% higher than 2020.
Buyers and sellers alike will need to see how the market reacts and set some goals, including minimum price, ideal price, and ideal closing date, based on the trends. It’s then a good idea to contact a D.C. real estate agent to get your home listed and on the market as quickly as possible.
Learn More About D.C. Housing Market Trends
It’s inevitable that 2021 will be a year of ups and downs as the country recovers from the most significant public health event of the past 100 years. The housing market will likely continue as a sellers’ market driven by a lack of supply, but increasing mortgage rates could slow things heading into fall.
Browse the Nomadic Real Estate website for more information on D.C.’s housing market trends. You can also contact us today to go over your leasing, sales, or property management needs in the Washington, D.C., area.